Research Discussion Paper – RDP 2019-06 The Effect of Mortgage Debt on Consumer Spending: Evidence from Household-level Data

Contents

• Introduction
• Literature Survey and Our Contribution
• Data
• Does Mortgage Debt Affect Spending?
• Why is There a Negative Effect of Debt on Spending?
• Does Debt Amplify the Effect of Financial Shocks on Spending?
• Implications for Aggregate Household Spending
• Conclusion
• Appendix A: Debt Overhang Model
• Appendix B: Institutional Features of the Australian Mortgage Market
• Appendix C: Summary Statistics
• Appendix D: Variable Definitions
• Appendix E: Alternate Debt Measures
• Appendix F: Full Regression Results – The Debt Overhang Effect
• References
• Copyright and Disclaimer Notice

We would like to thank James Bishop, Nick Garvin, Aaron Hedlund, David Norman, John Simon, Peter Tulip, Michelle Wright, and seminar participants at the Bank for International Settlements, the Australian Treasury, the Deakin University Centre for Banking and Financial Stability Workshop, the Reserve Bank of New Zealand and the Reserve Bank of Australia for their helpful comments and suggestions. The views expressed in this paper are our own and do not necessarily reflect the views of the Reserve Bank of Australia. Any errors are our own.